Hello and welcome everyone to the Fiscal 2025 Third Quarter Earnings Call for Commercial Metals Company. Joining me on today's call are Peter Matt, Commercial Metals Company's President and Chief Executive Officer, and Paul Lawrence, Senior Vice President and Chief Financial Officer. Today's materials, including the press release and supplemental slides that accompany this call, can be found on Commercial Metals Company's Investor Relations website. Today's call is being recorded. After the company's remarks, we will have a question and answer session and will have a few instructions at that time. I would like to remind all participants that today's discussion contains forward-looking statements including with respect to economic conditions, effects of legislation and trade actions, U.S. Steel import levels, construction activity, demand for finished steel products, the expected capabilities, benefits, costs, and timeline for construction of new facilities, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures, and capital spending. These statements reflect the company's beliefs based on current conditions, but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-Ks, and other filings with the U.S. Securities and Exchange contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements. Except as required by law, Commercial Metals Company does not assume any obligation to update, amend, or clarify these statements. Some numbers presented will be non-GAAP financial measures and for such numbers can be found in the company's earnings release supplemental slide presentation or on the company's website. Unless stated otherwise, all references made to year or quarter end are references to the company's fiscal year or fiscal quarter. And now for opening remarks and introductions, I will turn the call over to Peter.

Good morning, everyone. And thank you for joining Commercial Metals Company's third quarter earnings conference call. Before jumping directly into a discussion of the quarter, I would like to take a moment to zoom out and offer some broader insights regarding where we see our company today, where we envision taking Commercial Metals Company in the future, and importantly, why we believe Commercial Metals Company offers a compelling investment thesis. Today, Commercial Metals Company is a leader in most of the markets in which we compete, supported by our exposure to attractive and growing geographies, strong customer relationships, and exceptional operational capabilities. Additionally, our core domestic long steel markets are benefiting from industry consolidation and favorable trade policy we believe will underpin structurally enhanced margins through the cycle. On the demand side, we expect powerful tailwinds from long-term secular trends that will drive construction investment for years to come. From this position of competitive strength and attractive end market exposure, we are now moving forward with the execution of a game-changing strategy intended to meaningfully and permanently enhance Commercial Metals Company's financial profile and turbocharge value-accretive growth. We are aiming to deliver higher, more stable margins and cash flows through the cycle as well as a step change in returns on capital. I believe the strategic action Commercial Metals Company is taking and the course we are traveling provides a compelling opportunity for investors. Successful execution of our strategy should result in margin and cash flow levels well above what we think are currently priced into our shares. Now let's jump into our third quarter results. Commercial Metals Company reported net earnings of $83.1 million or $0.73 per diluted share on net sales of $2 billion. The result included $1.3 million of after-tax charges, which Paul will take you through…

Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal third quarter 2025 net earnings of $83.1 million or $0.73 per diluted share, compared to net earnings of $119.4 million and net earnings per diluted share of $1.20 in the prior year period. Excluding estimated net after-tax charges of approximately $1.3 million, adjusted earnings for the quarter totaled $84.4 million or $0.74 per diluted share, compared to $119.6 million or $1.02 per diluted share respectively in the prior year period. These adjustments consisted of a $3.8 million pre-tax expense for interest on the judgment amount associated with the previously disclosed Pacific Steel Group litigation as well as a benefit from the settlement of a new market tax credit transaction. Consolidated core EBITDA was $204.1 million for the third quarter of 2025, representing a decline from the $256.1 million generated during the prior year period. Slide 12 of the supplemental presentation illustrates the year-to-year changes in Commercial Metals Company's quarterly financial performance. Profitability at our North American Steel Group was negatively impacted by lower margins over scrap, while adjusted EBITDA at both our Europe Steel Group and Emerging Business Group increased compared to the third quarter of 2024. Consolidated core EBITDA margin of 10.1% compared to 12.3% in the prior year period. Commercial Metals Company's North American Steel Group generated adjusted EBITDA of $186 million for the quarter, equal to $161 per ton of finished steel shipped. Segment adjusted EBITDA decreased 24% compared to the prior year period, driven primarily by lower margin over scrap costs on steel and downstream products. North American Steel Group adjusted EBITDA margin of 11.9% compares to 14.7% in the third quarter of 2024. Segment results improved on a sequential quarter basis as steel product margins expanded from their…

Thank you, Paul. We expect consolidated financial results in the fourth quarter of fiscal 2025 to improve compared to the third quarter. Finished steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends while our adjusted EBITDA margin is expected to increase sequentially on higher steel product margins over scrap. Based on project backlogs, we expect financial results for the Emerging Businesses Group will improve on both a sequential and a year-over-year basis. Our Europe Steel Group will receive a CO2 credit of approximately $28 million during the fourth quarter as a result of a recently signed Polish legislation that divided payments related to calendar 2024 energy cost rebates into two tranches. We will receive the second tranche related to the calendar 2024 credit during the first quarter of fiscal 2026. Excluding this credit, adjusted EBITDA for our Europe Steel Group should increase sequentially in the fourth quarter as we continue to benefit from improved market fundamentals and extensive cost management efforts. I am confident in Commercial Metals Company's long-term outlook and continue to believe in our ability to generate significant value for our shareholders. We are executing on several strategic initiatives which we believe will deliver meaningful and sustained enhancements to our margins, cash flow, and return on capital. We will achieve this by leveraging our TAG operational and commercial excellence program to get more out of our existing enterprise, completing value-accretive organic growth projects, and adding complementary early-stage construction solutions that provide attractive new growth platforms. Taken together, we believe these efforts will position our company to take full advantage of powerful structural trends in the domestic construction market for years to come. I would like to conclude by thanking our customers for their trust and confidence in Commercial Metals Company and all of our employees for delivering yet another quarter of very solid safety and operational performance.

Thank you. And at this time, we will now open the call to questions. And your first question comes from Sathish Kasinathan with Bank of America. Please go ahead.

Yes. Hi, good morning. Thanks for taking my questions. My first question is on the steel products volumes in the North American segment. It seems the steel product volumes were only up like 7% sequentially in the third quarter versus the typical seasonal pickup of like 10% to 15%. Can you please talk about what drove that? And is timing of shipments? Or did you see impact related to the outages that you had in the third quarter? And as a follow-up, how should we think about the fourth quarter volumes for the segment? Both for steel products as well as downstream products? Thank you.

Thanks, Sathish. Appreciate the question. It's a good one. So I just want to put out there that overall, we are pleased with our Q3 performance in North America. But it wasn't our best performance. We had some outages late in the quarter. And coming out of those outages, there's always some challenges associated with that. We didn't come out of those outages as well as we could have. And as a consequence, we ended up not having the production that we were aiming for. We ended up with lower inventories and consequently higher costs. So that together with the impact of the flow through of scrap timing in our results more than explains the miss in the North American Steel Group in terms of shipment volumes and in terms of profitability relative to the consensus out there. I think the bottom line is that we're a company of great operators. We've kind of circled back on each of these situations. We understand exactly what happened. And we're set for a strong fourth quarter. So we feel very good about where we are. In terms of fourth quarter volumes, I think you can expect them to be flattish to slightly up from where we are in the third quarter. And yes, volume should follow a normal seasonal trend.

Sathish, the only thing I would add is when we talk about finished steel tons, we combine steel products and downstream products because essentially all those are coming off the mills whether it's through directly to mill customers or to our own customers through the downstream sales and those were up 10% in alignment with normal volume trends between Q3 and Q3.

Yes, understood. Thank you. Maybe my second question is on the U.S. Rebar pricing. We saw mills announce a $60 price hike recently. Are you seeing prices gaining traction? And do you see further room for additional price hikes given where the import offers are? Thank you.

Yes. It's a great question. I want to just start by saying we don't talk directly about price. But I will make a few comments around this one. Look as a company, we are in pursuit of commercial excellence. What I mean by that is value over volume. We've said that on prior calls. And that's it's a maniacal focus for our company. In the context of the current situation, there's a balance that we have to strike. It's a balance between doing what's or creating the best value for Commercial Metals Company and generating a good return on the sales that we're making. And secondly, balancing what's right for the customer. And thirdly, incentivizing Buy America. So we think we struck the right balance in coming up with the move that we made. This is something that we evaluate on a regular basis. We're going to continue to monitor it, and we'll make adjustments as appropriate.

Okay. Thank you and good luck for the fourth quarter.

Thank you, Sathish.

And your next question comes from Tristan Gresser with BNP Paribas. Please go ahead.

Yes. Hi. Thank you for taking my questions. First one, just on volumes as well, if you could provide us maybe an update on Arizona two, the average utilization rate for this quarter and maybe the target for the next fiscal year? And if I understand your comment correctly about the plus $150 million EBITDA improvement, would that mean that the facility is currently still at breakeven?

Yes, So, on Arizona two, made very good progress during the quarter and I'm pleased with what the team has done that. We organized what we call internally a blitz. And the blitz was really a combination of resources internally and externally to kind of drive the business to generate or to prove that it can operate where we think it can operate. And that it can do so in a reliable way. I would say that the equipment is we're most of the way through kind of our confidence in the equipment. And we have a good line of sight to be able to say that we are fully through the equipment issues that we've had. And I'm also really pleased with the fact that we got our MBQ up to a run rate where we're producing 75% of the SKUs by volume at the plant. So remember this is the first plant ever to produce merchant bar quality products. As we the year from where we sit today, we think we're going to be exiting at around 70% to 75% utilization. And but I know that's a little bit below what we've said before. But I think given some of the challenges we've had in the focus that we put on merchant bar, it makes sense to come out where we are. And we are confident that we can get the rest of the way there in early 2026. And I would also say that we do expect to have a profit in the fourth quarter at Arizona two. So all in all, good progress. We're working extremely hard and I'm really proud of the job that team has done to get to where we are.

All right. That's very clear. And maybe the targeted mix for next year, do you expect to still be very MBQ driven mix? Or what would be the right way to think about it versus rebar?

Yes. I think that's going to emerge with the market conditions. As you know, the capacity of the plant is 500,000 tons. And our original plan was to make 350,000 of rebar and $150,000 of merchant bar. So I'd say kind of ordinary market conditions permitting that's still our plan. But again, what's nice about this mill is that we have the flexibility to adjust to market conditions. So if the rebar market is a little bit softer, the MBQ market is a little bit softer, we can adjust one way or the other accommodate that.

All right. That's very clear. And maybe one last question just on West Virginia. Just wanted to confirm that the ramp I'm not sure I understood correctly, it's been delayed by six months. It's planned for the summer next year. I understand you explained it with the tax rebate and some weather issues. Has some part of that decision also been driven by maybe a less robust near-term outlook? I mean, you look at domestic supply, you have two new mills ramping up in Q3, Q4 calendar. And demand is not particularly great. So has that had any impact in your decision there? And also given the push, how should we think about maybe CapEx for next year? That would be helpful. And next fiscal year? Thank you. Yes. And I'll let Paul take the CapEx question. But let me first start out on West Virginia. So timing, we've said first half. We're going to start there's a cold commissioning phase, there's a hot commissioning phase. We're going to be doing the hot commissioning phase kind of in the first half of the year. So and the timing on this is really these are it's a good thing that we came across this 48C thing. The team did a phenomenal job in getting this grant from the Department of Energy. And it was worth waiting for this. And what we needed to do and what caused the delay was we needed to work through some of our processes internally to make sure that we could comply with the Department of Energy requirements. But as a consequence, we're getting $80 million towards this project. And what's the benefit of that? Well, reduces the net capital that we put into the project and therefore helps us drive higher returns. And hopefully, you're seeing a consistent pattern here of our focus is on changing the return profile of the company and in getting a grant like this at absolutely helps us do this. The timing has nothing to do with the conditions in the market. We are actually quite optimistic about market conditions. There is a lot of uncertainty out there today. But we believe that kind of things are going to stabilize. And in the stabilization of things you're going to see emerge, the demand for our rebar products, our merchant bar products that's consistent with what we've been saying for the last several quarters. You've got some megatrends in whether it's infrastructure, reshoring, energy transition, all of which we talked about that I think are going to drive demand and we are going to be ready to receive it.

Let me just add to Peter's comment around the investment tax credit. The project qualified for the tax credit under the IRA and there's been no concern around this type of credit being clawed back. The credit could be either a 6% credit or a 30% credit. And so the magnitude of the difference is significant. And that's why we paused the contracting of work to ensure that we contract in such a way to comply with the requirements of attaining the higher rates. And we're now confident that we will in fact get that higher rate credit. And so that will provide as we said in the prepared remarks a net $80 million benefit to us. Next year. So with the delays we've spoken many times around our expectation of normal ongoing CapEx and that's going to be sort of maintenance plus core smaller organic growth in the $250 million range. And then we would expect around $300 million associated to West Virginia year. So as it looks right now, our CapEx for West Virginia or for total for Commercial Metals Company will be in the $550 million range for next year.

All right. Thanks a lot.

Thanks, Tristan.

And your next question comes from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi, thank you for taking my questions. Maybe starting on the inorganic growth Peter, you mentioned that the ideal transaction value would be somewhere between $500 million to $750 million. Can you talk a little bit about what type of multiples would be attached to that?

Yes, great question. Katja. Thank you very much. It depends based on the asset that we're looking at. But what I would say is that the multiples generally for these businesses are higher than what Commercial Metals Company trades at. And I want to make a couple of points about that because I think this is really important. One is the multiples for those businesses are higher because they're worth it. And what I mean by that is these are companies that have higher margins, better cash flow characteristics because they're lower capital intensity. And in most cases, some growth to them given some of the market trends that they're responding to. So I do think that the businesses are worth the higher multiples that we may have to pay in this situation. The other thing that I think is really important when we talk about inorganic, and I know it wasn't directly your question, but I'm going to throw it out there is that we're going to be very disciplined about our inorganic growth. And particularly recognizing that we're paying higher multiples for some of these businesses. And the discipline that we are going to hold ourselves to is that over a reasonable amount of time, say, three, four years, we are going to bring the effective multiple that we pay down to our multiple. Down to Commercial Metals Company's multiple. That's going to happen through a combination of synergies that we might bring to the table and growth. And if we can do that, we will create significant value in those acquisitions. And that's again, that assumes zero multiple expansion for Commercial Metals Company. Which as we grow the portfolio of these value-added businesses theoretically we should enjoy some multiple expansion. So I know that's beyond what you asked, but I wanted to get it out on the table because I think it's important that everyone understands that.

That's excellent. Thank you for that. Maybe just as a follow-up, is there when you look at the current pipeline, how does it look? And do you have any this is hard to answer or impossible, but is there any timeline on when you could complete a deal of this size?

Yes. Good question. Thank you. The pipeline is good. I would say there are a number of different businesses that we've been looking at. And there are kind of processes that we are engaged in right now. Some of them are quite mature. Some of them are really just starting. I would say in general, these processes are moving slower given some of the uncertainty in the market. But they are moving forward. And we've done a lot of work. I think we, as a company, we know what we want to do. So this is really a matter of kind of matching terms with a seller, terms that are acceptable to us, and then we'll be ready to proceed. But we're ready. And as you say, it is hard to call the exact timing, but I would say we're ready.

Perfect. Thank you so much.

Thank you, Katja.

And your next question comes from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Hey, good morning.

Hey, Phil.

You outlined a $28 million credit for Europe in the fourth quarter and essentially said there was likely to be more in the first quarter. Can we have an idea of what that may be?

Yes. Well, so what this is, is that our team in Poland again, is just another example of a great job that they do. They get the CO2 credit annually. And the CO2 credit pays out with an eleven-month lag. So that's what we get it in November. Which is our Q obviously in our Q1. Through the good efforts of the team in Poland, what we've been able to do is to get this changed so that the payments will now be split in two. The first payment in an ordinary year, this year it will be in July, but in an ordinary year it will be paid in May, will be 60% of the CO2 credit and the balance will continue to be paid in November. That will be the remaining 40%. So what we're seeing in the first early installment, which will, again, as I said, be paid in July, is the $28 million which is 60%. And it's roughly we're assuming it's kind of staying consistent with last year's CO2 credit, which as you know that CO2 credit will vary depending on the cost of CO2 embedded in the energy cost.

So I guess the key is we anticipate that each fiscal year will receive one year's worth of CO2 credits into the future split into two installments with the difference being essentially a catch-up that we'll get this year which will get the extra payment in fiscal 2025.

Okay. So we So we're likely to get $15 million to $20 million in Q1 and there's likely to be some then paid in the fourth quarter of 2026?

Third or fourth quarter, That's right.

Okay. May is the technical time team.

Line for payment.

Okay.

And with regards to the CapEx number you gave for next year, Paul, the $550 million was that a gross number, meaning before the $80 million you outlined? Or was that the $80 million That is gross and then

so we would expect gross CapEx in the $550 million range. The benefit of the tax credit to be $80 million to Commercial Metals Company. And then other incentives will probably be in the $45 million range that we will receive as well.

Okay. So roughly $450 million in that. Are you getting anything in the fourth quarter of this year?

We will probably get it's all timing, we'll likely get a $25 million credit in fourth quarter as well.

Okay. And addition to the $100 million to $105 million that you outlined?

That's right.

Okay. And the last one here is the timing of the startup of the West Virginia mill. Sounds like it's mid-calendar '26. So the startup costs associated with that mill, will be largely back-end loaded pretty like very back-end loaded, guess? Next year? For your fiscal Yes. I think that's a fair assumption.

Yes, we'll carry some team as we start to employ people throughout the year, but similar to other mill startups that we've had.

And is there any CapEx that from West Virginia then because of the slight delay that get moved into '27?

Relatively small amount.

Okay. Appreciate all that color. Thanks guys.

Thanks, Phil.

And your next question comes from Bill Peterson with JPMorgan. Please go ahead.

Hi, good morning and thanks for sneaking me in. On Europe, the fiscal third quarter saw a diversion between rebar and MBQ sequentially. Should we think of this reversing in the fourth fiscal quarter? And I guess how should we think about overall shipments directionally?

You're saying in Europe?

Yes. So we expect shipments in Europe to continue at a strong pace. In the fourth quarter. And I think you were also asking about the mix of MBQ and rebar and we expect MBQ shipments to be strong in the fourth quarter. We've done a lot of work on mix there based on where the profitability is back to the kind of commercial excellence. Story that I was telling before. And we're really focused on optimizing our mix to the products where the best margin is and this year that's been MBQ.

We're seeing a lot of projects come to market certainly starting to see initial benefits of some of the EU money that is coming into the marketplace. So we are expecting some increase in volume in the fourth quarter, which really is similar to a seasonal uptick in fourth quarter volumes that the EU marketplace sees.

And just to put a little bit more color on what Paul is saying, the picture in Europe does appear to be getting better and let me talk about a couple of different fronts. One is you've got in Poland, the economy obviously continues to chug along very nicely there. But the government's now put in place a new infrastructure spending program. And when you kind of look at that by the project they're going to be investing in, we're talking about kind of hundreds of thousands of tons over the next couple of years. So that's going to be a nice shot in the arm. You may have also read articles about there's Poland's first nuclear power plant is going to be built. This is maybe a little bit lagged in terms of timing. It's probably going to start construction. My guess would be in 2027. But again, that's going to be a big consumer of rebar. And to Paul's point, you've got recovery in resilience funding going on. The other thing that I think is really important to note is it appears that things are moving nicely in Germany. And we talked about last time we talked about the fact that there's the infrastructure build a $500 billion infrastructure or euro infrastructure bill and the lifting of the cap on spending on defense. And Chancellor Mertz has been very strong in his statements about the case of defense spending. We need to do whatever it takes. And in the case of the economy, getting the economy back on track our understanding is that he's making a really strong push on infrastructure spending, and stimulus to some of the segments of non-residential spending. So as a consequence, what we were saying I think on the last call was we expected we'd see that in the kind of mid to back part of '26. We've heard discussions recently that suggest that could start seeing some of that as early as the fourth calendar quarter of 2025 and into the early part of 2026. So again, we need to see it on the ground. But I just pointed out because there are reasons for optimism in Europe.

Yes. Great. Thanks for that. And I realize don't want to be precise around pricing, but in terms of the backlog, last quarter you mentioned that project awards were benefiting from higher prices should we think about when that shows up? And are pricing for, I guess, what's entering the backlog now higher than existing prices that are in the backlog?

Yes. You're talking about on the fabrication side.

Correct.

Yes. So what I'd say on that thanks for the question. It's a great question. So Q3 was competitive. And we saw the booking prices continue to slide. During the quarter. But as we go into Q4, we expect we're going to see that turn and the booking prices are going to start to increase in Sympathy, with the move in rebar prices. That's typically the way it flows. And I want to just take a minute here to really highlight the great job that our fabrication team across the company has done in this market environment. And it's really important because they are taking this business and they are helping us make it even better than it is today. And three things that I want to point out here that are I'm really optimistic about. One is through TAG and operational excellence, a lot of new initiatives are coming in the fabrication business and we see opportunity for that business to be stronger. Secondly, they are absolutely paying attention to our mantra of value over volume. And what we're seeing is we are seeing our rebar fab guys walk away from jobs where it does not make sense because we cannot generate a return on the investment that we have. And that is I'm super proud of the discipline the market discipline that the team is showing. And the third thing that I want to really compliment them on is addressing some of the duration risk in this business. Those of you that have been following us for a long time, know that there that we do take duration risk in this business. And it can lead to periods where the fabrication business is less or not profitable. I'm pleased to say that by focusing on this duration risk and by that I mean insisting that we have proper escalators to compensate us for the duration risk we're taking we are making this business a better business. And I think a great source of evidence of that is the fact that we will go through the trough of this cycle in fabrication and be a profitable business. And our goal is that we're going to increase that bar, we're going to raise that bar over time and make this a better business. So look, this is something and again, I'm sorry, know you didn't ask for all this, but but I think it's really important and I'm super proud of our team and this is not something that's going to happen overnight. But I think it's going to help this business be better over time. So thanks for the question.

Thanks for sharing the additional insights.

And your next question comes from Mike Harris with Goldman Sachs. Please go ahead.

Yes. Thanks guys for squeezing me in. I guess just given your strong financial position, why did you buy back more shares during the third quarter? And maybe speak to how we should think about the cadence of repurchases going forward considering it looks like you've averaged roughly $50 million per quarter in repurchases since maybe the second fiscal quarter of 2024?

Yes. Good question I'll start and then I'll let Paul can jump in on this. But so look we do have a strong financial position. We're also kind of working on some strategic initiatives around growth. And one of the things that's absolutely critical to us is that we maintain a strong financial position while we grow. So as we kind of understand where we're going from a growth perspective, I think that will help reorient us in terms of what we have the capacity to do on the share repurchase side. Maybe Paul can pick up for there.

Yeah. I think we've stated our capital allocation priorities. Clearly, number one is growth and most recently that's been through the organic growth side. But as Peter outlined, we have aspirations in the inorganic. But beyond that we also have stated repeatedly a balanced approach to capital allocation citing a commitment to return attractive levels of cash to shareholders. And so we announced the buyback program in January of 2024 and said, our plans was to execute that over a period of two to three years. And and that's the course that we're on and we don't see any change in the execution of our commitment on that.

Okay. Thanks for the color guys. And I'll stop there in the interest of time.

Thanks Mike.

And at this time, there appears to be no further questions. Mr. Matt, I'll now turn the call back over to you.

Thank you. And just a few concluding remarks from me. At Commercial Metals Company, we remain confident that our best days are ahead. The combination of the structural demand trends we have noted, operational and commercial excellence initiatives to strengthen our through the cycle performance, and value-accretive growth opportunities create an exciting future for our company. We are committed to a balanced capital allocation strategy that includes investments in our company's future, and a return of capital to our shareholders. Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls and meetings in the coming days and weeks. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.